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Forest products logistics resilient, lucky after Hurricane Sandy

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NEW YORK, Nov. 5, 2012 (RISI) -Forest products logistics was largely spared from the effects of Hurricane Sandy that hit the New Jersey coast one week ago. Within two to three days of the storm passing, most of the ports, trucking and railways with dedicated forest products breakbulk services were resuming services. This could be due to the distributed nature of the US logistics infrastructure, but also to the luck that Sandy made landfall farther north.

Most of the East Coast ports dedicated forest products transport and distribution lie in the South and Mid-Atlantic region. The Port of Wilmington, North Carolina, the Port of Baltimore and the Port of Philadelphia, experienced some closures as precautions for the storm, but no significant damage was reported. These ports all resumed full operations within days after the storm.

The Port of New York and New Jersey, the largest container port on the East Coast, took the brunt of Sandy's 90+ miles per hour winds and flooding. However, by the Sunday, two terminals in Port Elizabeth, N.J. received calls from container ships. The Port Authority of New York and New Jersey also said two more terminals, Port Newark Container Terminal and Global Terminal, would reopen today, leaving only two container terminals still closed.

Road closures due to flooding and power outages continue to cause the most disruptions to logistics in the Northeast after Sandy. Many trucking companies held their drivers off the road until the storm passed, in part due to transportation restrictions. CSX and Norfolk Southern railroads told customers to expect shipments delayed up to 72 hours after the storm as railways came back online. Gasoline shortages are causing delays in areas closest to the New York area.

These operational problems forced numerous box plants across the Mid-Atlantic region to close for the week. Pratt Industries' recycled containerboard mill on Staten Island in New York City was knocked out by the storm, but mill officials said operations would restart soon. Two other mills were briefly disrupted; Fusion Paperboard in Connecticut and PaperWorks Industries in Philadelphia, both coated recycled paperboard mills.

Heavy toll, but a silver lining

The economic effects of Superstorm Sandy will take some time to calculate. Combining the two days of inactivity for the region, along with the extensive damage to heavily populated areas, initial estimates place losses by Sandy between $35 billion to $45 billion.

These initial estimates could double or triple as cleanup and recovery continues. In comparison, Hurricane Irene, which hit the region in 2011, was considered a much smaller storm than Sandy and initially estimated to cause $7 billion in damage. The economic cost of Irene was ultimately tagged $15 billion to $20 billion.

Rebuilding could lead to a short-term boom for forest products shipment. Richard Garneau, CEO of Resolute Forest Products, said the impact of Sandy would help the already strengthening housing recovery.

"They're going to have to rebuild, but it always takes some time for the cleanup to be done so I think the impact on demand of wood consumption is probably going to materialize in the second and third quarter of next year with the rebuilding efforts," Mr. Garneau said in an interview.

Last week, forecasts for an increase in construction material helped lumber prices surge to a 19-month high. The benchmark futures contract for January delivery of lumber closed at $331.20 (U.S.) for 1,000 board feet on the Chicago Mercantile Exchange, up by the maximum $10 daily limit. Reports say traders are focusing on the need to rebuild thousands of homes that were damaged or destroyed from the storm.

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